July 1, 2009 - Paraguayan cigarette manufacturers like to point out that they are just filling a void created by large multinational tobacco companies. In the 1990s, British American Tobacco and Philip Morris ran independent schemes in which their subsidiaries in Brazil and Argentina legally exported billions of cigarettes to Paraguay. The sticks were then smuggled back to these two higher-tax countries and sold on the black market. The practice ended in 1999 when the Brazilian government raised the cigarette export taxes dramatically to discourage the illegal trade.

Following the tax increase, dozens of cigarette factories opened in Paraguay, many of them owned fully or in part by Brazilians. Within three years, Paraguay was home to more than 30 cigarette manufacturing plants, some of which counterfeited well-known international brands.